Early this year as borders closed, and the depth and severity of the impact of the coronavirus on Pacific island economies became evident, experts predicted a dramatic decline in remittances to our region.
In revised figures, the World Bank now predicts a less pronounced decline of 7% in remittances to low and middle income countries this year. However Fiji’s Reserve Bank reports that total inward remittances from January to October this year stood at around F$521 million, with a total of $69 million in October alone, the highest monthly remittance since 1993.
ANZ Pacific Economist, Kishti Sen said remittances will be essential to economic recovery in the wake of COVID-19.
“Remittances don’t only support household budgets, they help pay for imports and, as a result, ease the pressure on a nation’s foreign reserves,” he said.
Sen believes the bounceback in remittances seen after an initial drop in April can be attributed largely to “income support payments that were part of the overall fiscal stimulus package in the source markets.
“Going forward, as some of those income support payments are wound back, you will probably see a pullback in remittance flows to the Pacific over the next four months of this year.”
But Sen doesn’t believe the drop in remittance flows, and the pressure it will put on household budgets, will result in collapse.
“Melanesian and Polynesian culture is such that you look after your family and friends and people will still be sending money,” he said.
New data from the ANZ reflects this trend, revealing that since the introduction of a temporary waiver of its A$7 international money transfer fee for online transactions to the Pacific, remittances have dramatically increased.
ANZ introduced the waiver on September 21st for electronic transfers to the Pacific using ANZ Internet Banking (from Australia and New Zealand) and the ANZ GoMoney App (from New Zealand only).
The Bank says in the month to October 21st, ANZ customers made more than 8,000 transfers, totalling almost NZ$15million.
In that same month, the number of online money transfers from New Zealand to the Pacific increased by 86% and transfers from Australia increased by 77%, compared to the same period last year.
November 2020 saw ANZ Australia and New Zealand customers send a combined volume of 8308 IMTs worth a value of $12.4m (AUD equivalent). This is an increase of 107% in volume and 30% in value when compared to the same period last year.
ANZ Regional Executive for the Pacific, Tessa Price, said they knew that remittances would be incredibly important in 2020.
“In the Pacific, for online transactions remittances can count for up to 25%.
“It’s tough economic times in the Pacific due to COVID-19. We had tourists who stopped coming overnight to countries like Fiji, Samoa and Vanuatu and remittances make up a really large component of people’s disposable income.
“With the islands grappling with the impacts of COVID-19, it’s important that we keep costs low to encourage money flows to where it’s needed.”
Addressing the costs of remittances has also been a focus for the region’s leaders.
In June, the Pacific Islands Forum Secretariat and the governments of Vanuatu, Tonga and Fiji joined a global call to action to policymakers, regulators and remittance service providers to improve migrants’ access to sending and receiving remittances, and to reduce transfer costs during the ongoing COVID-19 pandemic.
Similarly, in November the South Pacific Central Bank Governors Forum discussed the issue in the context of a ‘Know Your Customer’ (KYC) facility. The KYC facility intends to improve customer due diligence processes and Anti-Money Laundering /Countering Financing of Terrorism compliance, reduce the cost of remittances, lower legal compliance risks, and support the provision of correspondent banking services to the region.
Forum Host and Governor of the Reserve Bank of Vanuatu, Simeon Malachi Athy said: “Remittances are a key source of income for Pacific Island countries, and are crucial to the income for many families in these communities. The catastrophic impact of COVID-19 on the South Pacific economies has heightened the need to accelerate progress on this initiative. The implications of high remittance costs and de-banking are significant to the future economic wellbeing of the South Pacific Region – and globally.”
Remitters cover a vast cross-section of society, from accountants to aged care workers, from footballers and soldiers to second generation migrants who have retained their ties to their ancestral homelands.
“In 2019 for example, 12,200 Pacific people worked in Australia under the Seasonal Worker Program remitting nearly A$110m back to their families. For some countries such as Tonga, the net income remitted rivalled the direct aid provided by the Australian government,” said Sen.
In the early part of this year, the Seasonal Worker Program paused due to border closures and COVID-19 containment measures, however in August, the Australian government agreed recruitment for Pacific labour schemes could resume.
Their combined remittances are vitally important for Pacific families, and with continued border closures, Pacific islanders are increasingly reliant on formal channels, such as the ANZ, to send home remittances.
ANZ’s waiver on international online transfer money fees applies until the end of February 2021 to any foreign currency transfer sent from Australia and New Zealand to Cook Islands, Fiji, Kiribati, New Caledonia, Papua New Guinea, Samoa, Solomon Islands, Tonga, Timor Leste and Vanuatu. Usual foreign exchange rates and terms and conditions will still apply. For certain currencies, a correspondent bank may charge a fee for processing the payment to the beneficiary bank and the beneficiary’s bank may charge the beneficiary fee(s) for receipt of the payment.